Presentation on theme: "E-Commerce Business Models and Concepts"— Presentation transcript:
1 E-Commerce Business Models and Concepts Chapter 2
2 Learning ObjectivesIdentify the key components of e-commerce business modelsDescribe the major B2C business modelsUse an industry competition analysis framework to describe how e-commerce has impacted the level of competition in online industriesUnderstand key business concepts and strategies applicable to e-commerce
3 E-Commerce Business Models A business model is a set of planned activities designed to result in a profit in a marketplaceAn e-commerce business model aims to use and leverage the unique qualities of the Internet, the Web, and the mobile platformThere are eight key elements of a business model
4 Key Elements of a Business Model (Table 2.2) ComponentsKey QuestionsValue propositionWhy should the customer buy from you?Revenue modelHow will you earn money?Market opportunityWhat marketspace do you intend to serve, and what is its size?Competitive environmentWho else occupies your intended marketspace?Competitive advantageWhat special advantages does your firm bring to the marketspace?Market strategyHow do you plan to promote your products or services to attract your target audience?Organizational developmentWhat types of organizational structures within the firm are necessary to carry out the business plan?Management teamWhat kinds of experiences and background are important for the company’s leaders to have?
5 Revenue Model (Table 2.1)A firm’s revenue model describes how the firm will earn revenue, generate profits, and produce a superior return on invested capitalMost companies rely on one, or some combination, of the following major revenue models:Advertising (Yahoo)Subscription (WSJ)Transaction fee (eBay)Sales (Amazon)Affiliate (MyPoints)Why may a company want more than one revenue model?
6 Competitive Advantage Firms achieve a competitive advantage when they can produce a superior product and/or bring a product to market at a lower price than most, or all, of their competitorsTwo of the most common forms of competitive advantage are lower costs (fixed and/or variable), or better (differentiated) products or servicesWhat are some other sources of competitive advantage?
7 Raising CapitalRaising capital is one of the most important functions for a founder of a start-up businessMany entrepreneurs initially use personal funds (seed capital) to start their businessOnce such funds are exhausted, if the company is not generating enough revenue to cover operating costs, additional capital will be neededSources of capital include:IncubatorsAngel investorsVenture capital investorsCrowdfunding
8 B2C E-Commerce Business Models (Table 2.3) E-tailerVirtual merchant, bricks-and-clicks, catalog merchant, and manufacturer-directCommunity providerContent providerPortalGeneral portals, specialized portals, or search servicesTransaction brokerMarket creatorService provider
9 Other E-Commerce Business Models B2B e-commerce business models will be discussed later in Chapter 12Consumer-to-consumer (C2C)E-Commerce Enablers (infrastructure and support service providers, summarized in Table 2.5)Server hardware and software, cloud providers, hosting services, domain name registration, content delivery, site design, mobile commerce hardware and software, multimedia, security, payment, performance management, CRM systems, fulfillment, online marketing services, customer reviews and forums, live customer service, and Web analytics
10 Industry StructureIndustry structure refers to the nature of the players in an industry and their relative bargaining powerWhen you describe an industry’s structure, you are describing the general business environment in an industry and the overall profitability of doing business in that environmentIt is important for firms to assess the level of competition in their current and/or potential industries (industry structural analysis)The best known framework for assessing the level of competition in an industry is Michael Porter’s competitive forces model
11 Assessing Industry Competition Porter’s five forces include:The threat of entry of new competitorsThe bargaining power of suppliersThe bargaining power of customers (buyers)The threat of substitute products or servicesThe rivalry among existing competitorsWhat impact has e-commerce had on industry competition (based on each of the five forces and overall) when compared with competition in traditional industries?